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What's in the Offing for UnitedHealth (UNH) Earnings in Q3?

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UnitedHealth Group Inc. (UNH - Free Report) is set to release third-quarter 2020 earnings on Oct 14, before the market opens.

The Zacks Consensus Estimate for the company’s quarterly earnings per share is pegged at $2.98, indicating a decline of 23.2% from the year-ago period’s reported figure. The consensus mark for revenues stands at $63.79 billion, suggesting a rise of 5.7% from the prior-year quarter’s reported number.th

Factors Impacting Q3 Results

In the UnitedHealthcare segment, which accounted for nearly 60% of the company’s total revenues in the first six months of 2020, is likely to report an increase in revenues on growth in the number of individuals served through MedicareAdvantage, a greater mix of people with higher acuity needs and the return of the Health Insurance Tax, partially offset by a decrease in the number of individuals served through the commercial, Medicaid and Global businesses and foreign currency woes.

Earnings from operations in the segment are likely to have grown year over year due to the deferral of care because of COVID-19 on the health system. The return of the Health Insurance Tax, COVID-19 treatment and testing costs as well as customer assistance programs are likely to have weighed on the margins.

As the company’s Optum segment contributed to nearly 40% of the top line in the first half of 2020, the metric is likely to have risen at each of its sub operating segments, namely OptumHealth, OptumInsight, OptumRx.
    
At OptumHealth, revenues and earnings are likely to have expanded, primarily owing to acquisitions and organic growth in risk-based care delivery, partially offset by reduced care volumes in fee-for-service arrangements as a result of COVID-19. Earnings from operations are likely to have increased at its risk-based business due to the deferral of care caused by COVID-19.

At OptumInsight, revenues and earnings from operations are likely to have improved, primarily riding on organic growth and acquisitions in managed services, partially offset by lower activity levels in volume-based services due to the impact of COVID-19 on payer and care provider clients.

Revenues at OptumRx are likely to have bettered on organic and acquisition growth in specialty pharmacy and new client wins, partially offset by an expected large client transition and weak script volumes, attributable to COVID-19 related care deferral, mainly related to first fill script volumes. Earnings from operations are likely to have softened due to the impact of lower script volumes, partially offset by enhanced supply chain management.

Medical costs are likely to have dropped as a result of the temporary suspension of care due to COVID-19 and lesser number of people served in Medicaid, commercial and Global business, partially offset by higher number of people served through Medicare Advantage. The Medical Cost Ratio likewise is likely to have decreased on account of temporary postponement of care and the increase in healthcare cost due to  the return of the Health Insurance Tax.

The operating cost ratio is likely to have escalated, primarily due to the impact of the return of the Health Insurance Tax and the company’s COVID-19 response efforts.

Earnings Surprise History

The company boasts an attractive earnings surprise history. Its bottom line beat estimates in each of the last four quarters, the average being 11.64%. This is depicted in the chart below:

UnitedHealth Group Incorporated Price and EPS Surprise UnitedHealth Group Incorporated Price and EPS Surprise

What Our Model Says

Our proven model predicts an earnings beat for UnitedHealth this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: UnitedHealth has an Earnings ESP of 0.00% as the Most Accurate Estimate of $2.98 per share is in line with the Zacks Consensus Estimate.

Zacks Rank: UnitedHealth currently has a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks That Warrant a Look

Here are some companies worth considering from the healthcare sector as our model shows that these have the right combination of elements to beat on earnings this reporting cycle:

Humana Inc. (HUM - Free Report) has an Earnings ESP of +3.35% and a Zacks Rank #2, currently.

CareDx, Inc. (CDNA - Free Report) has an Earnings ESP of +16.67% and a Zacks Rank of 2, presently.

Teladoc Health, Inc. (TDOC - Free Report) has an Earnings ESP of +9.77% and a Zacks Rank of 3 at present.

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